UCITS denied pensions access
There has been some progress made recently towards prising open the market for UCITS funds - repeatedly touted by the European Commission (EC) as one of the key investment vehicles for retirement savings - but for many market participants things have not gone far enough.
Those advocating a tighter linkage between pension funds and UCITS also suffered a set back, as the European Parliament threw out a proposal to make it easier for fund managers to enter the pensions business.
On 24 May, European commissioner Charlie McCreevy, in charge of the internal market, was in London where he made a fairly characteristic speech to reaffirm his commitment to breaking down cross-border barriers for investment funds.
“We currently have a ‘spaghetti junction’ for finalisation of orders in cross-border funds,” he said. “This is a recipe for extra cost and operational risk.”
The commissioner promised that red tape would be slashed, and said that he expected a forthcoming expert group report, due to be published this month, to lead the way. An open hearing based on this report will take place in Brussels on 19 July.
McCreevy was addressing the annual general assembly of the Investment Management Association (IMA), which had earlier criticised the Paris-based Committee of European Security Regulators (CESR) for not doing enough to safeguard a free and unfettered UCITS market.
CESR, which is an advisory body to the commission, has just issued its second consultation paper on simplifying the cross-border notification process for UCITS funds, is blamed for dissuading many who might otherwise do so from setting up funds in other jurisdictions.
The group of European regulators that makes up CESR met on 22 May to discuss the latest consultation paper, which they insist goes as far as they are able to, while still respecting national law, in simplifying cross-border notification of funds.
But Jarkko Syyrila, European manager of the IMA, made it clear that he was not happy with the compromises reached by CESR and said that they should go further – a position, he asserted, that was very much shared by the other industry participants at the meeting.
“We feel that there are still many steps that should be taken to cut the time required to notify cross-border,” he said after the meeting. “We need to make cross-border notification as quick and easy as possible, in order to cut costs.”
For example, although CESR recommends imposing a maximum time limit of a month to perform a basic assessment of all necessary documents, Syyrila insists that this should be done within a week.
Syyrila points out that, while a UCITS fund should be able to establish itself in another country within two months of starting the registration process, things rarely run so smoothly and the process can often take half a year or longer.
Meanwhile, in Brussels, the latest attempt to bring UCITS fund management companies under the scope of the IORP - an initiative broadly welcomed by the European Fund and Asset Management Association (EFAMA) - has failed.
On 27 April, the European Parliament voted through a report on the commission’s asset management green paper - which among other things highlights the importance of UCITS for Europe’s investment fund industry - but at the same time it also refused to adopt two amendments tabled by Austrian MEP Othmar Karas, which would have allowed fund managers - and not just life insurance companies - to go into the pensions business without having to set up a new legal entity, an undertaking that for some smaller organisations can be onerous.
“The way things are means an extra overhead for UCITS firms wanting to offer retirement savings products in the second pillar,” Bernard Delbecque, director of economics and research at EFAMA, said.
But Delbecque is confident that the IORP directive could be revised in the future to create a true level playing field in the occupational pension market in Europe. “Members of the economic and monetary affairs committee simply did not find that the green paper on asset management was the right moment to discuss the matter,” he said.
“There is still a recital introduced into the IORP directive to request the EC to monitor the situation and to assess the possibility of opening the scope of the directive at a later stage.”